Life is Too Short? Bereaved Managers and Investment Decisions

We examine whether bereavement affects managerial investment decisions in large organizations using the exogenous events of managers' family deaths. We find evidence in separate samples of mutual funds and publicly traded firms that bereaved managers take less risk. Mutual funds managed by bereaved managers exhibit smaller tracking errors, lower active share measures, and higher portfolio weights on larger stocks after bereavement events. Firms managed by bereaved CEOs exhibit lower capital expenditures, fewer acquisitions, and lower CEO ownerships after bereavement events. The risk-shifting by bereaved managers has negative implications on the performance of funds and firms that they manage